Bank Nifty directional trade with Stop-Loss

Date: 29th Jan 2021

Asset: Bank Nifty

Thesis:

Following the downtrend, I decided to buy puts as I thought the trend would continue today. The idea was supported by the selling of shares by both FIIs and DIIs in the cash market the previous day and the setup of the bank nifty seemed to be bearish (If you see the trend before the point of entry marked below).

As you can see, I was completely wrong in my directional view as BN moved +1% by the end of the day. Although there was selling in the last half an hour, it was a gap up opening the next day. Stop-loss was hit leading to a loss of 2.5K. 

Few points that I could've used to give me a better view of the trend as listed below. Again, these points are in retrospect so can't really vouch for them but it will be a good checklist to look for before entering into a trade going forward

• Last hour buying the previous day - It should've given me the idea of the positive trend the next day
• Use of resistance and support levels - R and S levels could've been used to better manage the entry and exit points and also to place the stop loss. 
• Following the price action - After entering into the trad I realized that the trend has changed as BN was making higher highs and lows (See the trend after the entry point marked). This aligned with my perception that FIIs start buying in the cash market usually during mid-day.